Bitcoin has experienced a significant decline in price, falling from its peak of $49,000 at the ETF launch to its current price of $39,000. This represents a 9% decline over the past week and a 20% decline from the peak at the ETF launch. In fact, all of the top 50 coins reported negative returns in the last seven days.
Experts from cryptocurrency research company K33 Research shared a report on the source of the decline.
Even though ETF flows were clearly “neutral” last week, Bitcoin fell. According to analysts, the explanation for this decline lies in the combination of CME futures outflows, spot sales and structural factors.
According to the report, the market is currently experiencing a structural sell-off. CME traders unsurprisingly reduced their exposure following the ETF launch; This trend may continue until the CME open position held by active market participants withdraws another 20,000 BTC, reaching the 2023 average of 35 thousand BTC. Outflows from GBTC are not stopping, but are expected to decrease over time. European and Canadian ETPs are currently seeing moderate flows, indicating a gradual normalization following US ETF launches.
According to analysts, these structural effects will become less effective in a short time and will stabilize the price of Bitcoin as we enter February. The reduction of exposure in CME will likely occur rapidly as we approach Friday's January futures expiration.
According to Coindesk, one-third of GBTC outflows are related to FTX liquidations. Another significant portion of the flows is likely due to traders closing GBTC discount arbitrage trades. According to analysts, this unique negative flow in GBTC is expected to decrease rapidly.
According to K33 Research, analysts say the flow from the expensive GBTC product to cheaper ETFs will continue for some time with a net neutral market effect. He expects this process to accompany the market throughout the year, with a much softer price impact compared to last week.
As a result, the recent decline in Bitcoin price is attributed to a combination of factors such as CME futures outflows, spot sales, and structural factors. However, these effects are expected to decrease in intensity in a short time, leading to a stability in Bitcoin's price.
*This is not investment advice.
